TLDR
- New York AG Letitia James sued Coinbase and Gemini, calling their prediction markets illegal gambling operations
- The lawsuits seek to shut down the platforms in New York and recover profits, damages, and penalties
- The suit invokes the federal Wire Act of 1961 for the first time against a prediction market platform
- Kalshi was not included in the lawsuits due to its pending federal court case against New York regulators
- Coinbase has moved to transfer the case to federal court, arguing federal law overrides state gambling rules
New York Attorney General Letitia James filed lawsuits against Coinbase and Gemini on Tuesday. The suits accuse both crypto exchanges of running illegal gambling operations through their prediction market platforms.
The cases were filed in a Manhattan state court. They seek to permanently block both companies from operating unlicensed gambling businesses in New York.
The filings also ask for restitution, disgorgement of profits, damages, and financial penalties. James said that “gambling by another name is still gambling.”
She argued that prediction markets offered by both companies are “just illegal gambling operations.” She added that these platforms expose young people to addictive products without proper safeguards.
The Wire Act Argument
The New York AG’s office brought a new legal angle to the fight. According to gaming attorney Daniel Wallach, the suit appears to invoke the federal Wire Act of 1961 for the first time against a prediction market.
The Wire Act makes it illegal to use wire communications to send bets on sporting events across state lines. Federal appeals courts have consistently ruled that this law covers internet sports betting.
This matters because prediction market platforms have argued that federal law supports their operations. But the Wire Act is itself a federal statute, which means companies cannot simply claim federal preemption.
The lawsuits accuse both Coinbase and Gemini of “repeated and persistent” illegality. The filings say the platforms offer “what is quintessentially wagering” under New York law.
Neither company holds a New York State Gaming Commission license. That means they do not pay the 51% gross-revenue tax that licensed sportsbooks are required to pay.
That tax money funds public education, problem gambling treatment, and youth sports programs. New York also requires bettors to be at least 21, but both platforms allow users aged 18 to 20 to place sports-related bets.
Why Kalshi Was Left Out
Kalshi, the largest prediction market in the country, was not named in the lawsuits. The company preemptively sued the New York State Gaming Commission in October 2025.
Kalshi asked a federal court to rule that state gambling laws cannot apply to a CFTC-registered contract market. A motion to block the AG’s office from filing against Kalshi is still pending.
The CFTC itself has taken action to defend prediction markets at the federal level. In April, the agency sued Arizona, Connecticut, and Illinois to stop those states from enforcing gambling laws against CFTC-regulated platforms.
New York’s approach follows a playbook first used by Massachusetts. Instead of waiting to be sued in federal court, both states filed in state court to force platforms onto the defensive.
Arizona went even further by filing criminal charges against Kalshi in March. The state accused the company of running an illegal gambling business.
More than ten states are now involved in active litigation over prediction markets.
Coinbase responded quickly to the lawsuit. Chief Legal Officer Paul Grewal posted on X that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Coinbase has since moved to transfer the case to federal court. Grewal argued that the Commodity Exchange Act fully preempts state gambling law.
The company had already filed preemptive lawsuits in Connecticut, Michigan, and Illinois in December 2025. The attorneys leading the case against Gemini for New York previously worked as CFTC trial attorneys and led the federal agency’s 2022 lawsuit against Gemini over bitcoin futures manipulation claims.
Gemini settled that earlier case in January 2025 by paying $5 million without admitting liability. Federal legislation could resolve the jurisdiction question, but courts are expected to move faster than Congress on the issue.
